After years of waiting, the Canadian Tax Court has ruled that Jonathan Duhamel will not have to pay tax on his poker winnings. In Canada, income from gambling is usually tax-exempt. However, the Canadian Revenue Agency cited a precedent that said winnings became taxable if the gambling seemed sufficiently businesslike.
Duhamel has $18 million in live tournament cashes according to the Hendon Mob, and $8.9 million of that comes from his 2015 WSOP Main Event win.
The arguments were — in the broadest possible terms — as follows. Duhamel argued that he was not a professional, a win like that was pure luck, and that he had no system for overcoming luck in tournament poker. The court said he’d only ever made income from poker and poker-related sponsorships, so poker was his job and jobs get taxed.
While players in the U.S. and India have been fighting to have poker classified as a game of skill for legal reasons, it seems that in Canada, poker players really want the opposite.
The case started trickling through the courts back in 2020. But a combination of the COVID pandemic and court-house sluggishness meant the case didn’t get in front of the Tax Court of Canada until much later.
The court finally heard arguments in November of last year.
The case for luck in poker
Over the course of an 11-day trial, Duhamel did his best to make it clear that he was not a professional poker player. He claimed that his WSOP windfall of $8.9 million was (a) already taxed at source by a 30% US withholding tax, (b) the result of luck, not skill, especially in the short run, and (c) not all his anyway as he had swapped 46% of his action.
The dockets for the case included an appeal in December 2021, after which the court took some time to deliberate.
According to a report from the Financial Post, the court has finally ruled that Duhamel’s poker playing “was not carried on in a sufficiently commercial manner to constitute a source of business income for the purposes of the Act.”
Duhamel’s argument that he was just a luckbox and casual gambler doesn’t strike a poker player as particularly convincing. However, the standard the court used was a 2006 precedent. In the 2006 ruling, Chief Justice Donald Bowman ruled that a pair of sports bettors did not have to pay tax on their winnings. But if they gambled in such a way as to constitute self-employment, then they would have to render unto the Canadian Revenue Agency.
This ruling saves Duhamel a hefty tax bill and a decade’s worth of interest. The court listed the sum as CA$1.2 million, but that would not include the Provincial taxes that Revenu Québec might then take on top of that should the court have ruled against Duhamel.
Poker players across all ten provinces will be breathing a sigh of relief.